(Updates prices)
By Bruno Federowski
SAO PAULO, May 31 (Reuters) - The Colombian peso weakened on
Tuesday after the country's central bank announced it would
suspend an intervention policy aimed at slowing the currency's
decline.
The central bank said on Friday it would not hold any
additional dollar option sales, but it did not fully rule out
further intervention.
The bank also increased its benchmark interest rate for a
ninth consecutive month on Friday, to 7.25 percent, confirming
the expectations of most analysts in a Reuters poll and pushing
the peso down 0.75 percent to 3,091 per dollar.
The Colombian peso has weakened more than 8 percent
so far this month to its lowest since early April. Expectations
of higher U.S. interest rates and a decline in the price of oil,
a key export and source of tax revenue, weighed on the currency.
"This announcement eliminates a source of risk when taking
on USD/COP positions and should therefore expedite the COP
depreciation path," Nomura Securities strategist Mario Castro
wrote in a client note.
Colombian markets were closed on Monday due to a local
holiday.
The Brazilian real also weakened on Tuesday after the
release of leaked recordings resulted in a minister quitting
interim President Michel Temer's administration, the second such
departure since he took over from leftist Dilma Rousseff this
month.
Investors worry political instability could weaken the
government's ability to gain lawmaker support for austerity
measures as Latin America's biggest economy battles a deep
recession and stubbornly high inflation.
Brazil's benchmark Bovespa stock index also fell
more than 1 percent.
(Reporting by Bruno Federowski; editing by Dan Grebler and
Cynthia Osterman)